The Basics of Expatriate Tax Issues

It is not correct for an overseas American to believe that he or she has no need to file. Expats have the same annual filing requirements as Americans in the US.

However if the Expat has met either the Bona Fide Residence test or the Physical Presence Test, the Foreign Earned Income Exclusion kicks in and the first $80,000 of earned income is sheltered from income tax (but not self employment tax).

The Bona Fide Resident Test is met if an American lives in a foreign country for an uninterrupted period of 12 months that includes one whole tax year (From Jan 1 - December 31).

The Physical Presence test is met if an American is physically present in a foreign country(ies) for 330 full days during any period of 12 consecutive months., residence.

There are a lot of fine points in this area of law that this web site does not address, including the "totalization" rules whereby contributions to a foreign retirement system similar to Social Security may offset self employment tax in the U.S. The foreign earned income exclusion does not exempt the self-employed from social security taxes unless the "totalization" rules apply.

The main point we at Expatriate Tax Services wish to make is that tax returns must be filed by expatriates annually to get the Foreign Earned Income Exclusion and the returns must be filed by June 15 of the year following the normal filing date. (Tax year xxx1 return is due on June 15, xxx3).

We are pleased to represent Americans overseas who need US representation or an agent to assist with almost any sort of financial matter that may arise.

At this time we can assist you in Russian, Swedish, German, French, Spanish and Portuguese.

For more information call or write to us as shown above.